Argentina was hit especially hard by the effects of COVID-19 and the quarantine. Such a measure posed steep economic costs and has led the population to start questioning the effectiveness of Argentina’s economic management of the pandemic.
It is also worth asking whether other economies have suffered similarly. The interesting thing about the current crisis is that it has impacted the entire world, and practically at the same time, allowing us to directly compare different governments’ responses and their results. That is, if the same event impacts every place in the same way, the difference in results can be attributed to the policies each country administered in response to that event.
To evaluate the above proposition, I will use the recently published Macroeconomic Performance Index from the Universidad del Salvador (MPI-USAL). In the first quarter of 2020, the MPI-USAL for Argentina was the lowest among 11 countries in the sample. By the second quarter, its index had fallen by 71%. This drop in the indicator is the highest among the 11 countries selected. In summary, it could be inferred that, according to the MPI-USAL, Argentina had the worst economic management during the pandemic.
Compared to rest of the region, Argentina has consistently ranked lower than Brazil, Chile, Colombia, and Paraguay since 2017. Good macroeconomic performance not only offers opportunities for business, but also yields results from a social perspective. Cases such as Paraguay, Chile, and Colombia are worth noting. Paraguay closed the year 2000 with a poverty rate of 57.7%. In 2019 it had dropped 23.5%, which was substantially lower than in Argentina. Chile went from 36% to 8.6% in the same period. In Colombia they managed to reduce poverty from 53.7% in 2002 to 35.7% in 2019. Note that MPI-USAL scores in all of these countries were always both higher than that of Argentina and more stable in their values. These countries all began the millennium with similar poverty rates, and after 20 years of orderly management of their macroeconomy, Paraguay, Chile, and Colombia have managed substantially lower poverty rates than Argentina, which stands at 40.9% of the population.
In addition, since 2017, Argentina’s MPI-USAL score has consistently trended downward while remaining steady for many other countries during that same time period. As such, we must consider variability, which is a decisively influential factor on a country’s macroeconomic performance. Countries that grow tend to be more stable, and vice versa. Argentina is not only the country with the worst performance, but it is also the country with the highest variability in its index. Predictability allows consumers and producers to predict a horizontal trend, invest, grow, and develop. All these options are cancelled out in such volatile contexts as those of Argentina. Growth in unstable contexts cannot be sustainable. Argentine history is a clear example of this.
Argentina has suffered from many years of macroeconomic mismanagement, and the results are there for all to see. To reverse this trend, policy makers must first take steps to improve macroeconomic health.
Dome flickr photo by jglsongs shared under a Creative Commons (BY) license